Inside Financial Markets

AsiaN Stocks Rise on Fed Bets; Australia at Five-Year High

asia 2AsiaN Stocks Rise on Fed Bets; Australia at Five-Year High

Asian stocks rose, with the regional equities gauge rebounding from last week’s decline, after weaker than forecast U.S. consumer confidence spurred bets the Federal Reserve will maintain stimulus.

CSL Ltd. (CSL), a maker of blood-derived therapies that gets more than a third of its sales in the U.S., advanced 3.1 percent in Sydney. Toyota Motor Corp. gained 1.1 percent in Tokyo as the yen weakened against the dollar, boosting the earnings outlook for Asia’s largest carmaker. Kingsgate Consolidated Ltd. fell 4.7 percent in Sydney as the gold miner reported an 18 percent drop in quarterly output.

The MSCI Asia Pacific Index gained 0.7 percent to 142.32 as of 12:29 p.m. in Tokyo, with all 10 industry groups on the gauge rising. Investors are awaiting industrial production data today from the world’s largest economy, the next barometer for clues as to whether the Federal Reserve will delay scaling back U.S. monetary stimulus.

“We are in a liquidity-fueled stock boom,” Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion, said in an e-mail. “Rising valuations have never stopped overheating markets, so the market rise could be extended, as long as central-bank stimulus remains in place.”

The MSCI Asia Pacific Index fell 1.5 percent last week, curbing its October gain to 2 percent, with the measure on course for a second monthly increase. That pushed its price-earnings multiple to 13.6 times estimated profit on Oct. 25 from 12.7 at the end of August, according to data compiled by Bloomberg. That compares with 15.9 for the S&P 500 and 14.8 for the Stoxx Europe 600 Index.

Regional Gauges

Japan’s Topix index advanced 0.9 percent. Australia’s S&P/ASX 200 Index (AS51) rose 1 percent, to the highest level since June 2008, as CSL gained 3.1 percent to A$68.495. South Korea’s Kospi index added 0.4 percent after a Bank of Korea survey showed consumer sentiment rose this month to the highest level since May 2012.

Hong Kong’s Hang Seng Index increased 0.4 percent and China’s Shanghai Composite slid 0.3 percent. Taiwan’s Taiex Index added 0.7 percent and Singapore’s Straits Times Index gained 0.2 percent.

Komatsu Ltd. and China Telecom Corp. are among Asian companies scheduled to report results today, while Apple Inc. reports in the U.S. Of the 100 companies in the MSCI Asia Pacific Index that have provided quarterly results this earnings season and for which Bloomberg compiles estimates, 55 posted profit that missed expectations and 56 missed sales estimates, the data show.

Bank Profit

China Construction Bank Corp. advanced 0.7 percent to HK$5.75 in Hong Kong after reporting growth in loan and fee income that helped boost third-quarter profit at the nation’s second-largest lender by 9.4 percent, matching analysts’ estimates.

Ping An Insurance (Group) Co. gained 2.1 percent to HK$58.25. China’s second-largest insurer said profit more than doubled in the third quarter as a stock-market rally boosted investment returns and revenue from its banking unit expanded.

Japan’s Topix index fell 2.3 percent last week. The gauge still climbed 37 percent this year, the largest rally among 24 developed equity markets tracked by Bloomberg, amid optimism Prime Minister Shinzo Abe’s policies and unprecedented monetary easing from the Bank of Japan will lead the country out of deflation.

China Bets

Chinese brokerages are betting the biggest jump in money-market rates since June’s record cash crunch is a sign of strength in the nation’s economy rather than finance-industry weakness. The central bank has refrained from injecting funds into the banking system since Oct. 17, driving the benchmark seven-day repurchase rate 138 basis points higher to 4.88 percent last week, the most in four months.

Yet the one-year swap contract, the fixed payment needed to lock in the repo rate for 12 months, rose just 11 basis points to 4.08 percent, reflecting expectations for a gradual increase in borrowing costs. That’s well short of a 5.06 percent peak in June, when investors were concerned overstretched banks would default on payments.

S&P 500 Index futures rose 0.4 percent today. U.S. stocks completed a third straight week of gains on Oct. 25, sending the S&P 500 to a record, as earnings beat estimates and weak economic data fueled speculation the Fed will delay reducing stimulus. Consumer confidence in the U.S. dropped to a 10-month low, a private report showed Oct. 25.

Fed Meeting

A two-day meeting at the Federal Open Market Committee will start tomorrow after U.S payrolls rose less than projected last month and the 16-day government shutdown took at least $24 billion out of the economy.

The Fed is likely to delay lowering its $85 billion in monthly bond purchases until March, according to a Bloomberg News survey of economists conducted Oct. 17-18.

Japanese exporters advanced as the yen fell 0.2 percent to 97.59 per dollar. Toyota added 1.1 percent to 6,270 yen. Panasonic Corp., a Japanese home-appliance manufacturer that gets almost half of its revenue abroad, rose 2.2 percent to 942 yen.

Australia & New Zealand Banking Group Ltd. gained 1.5 percent to a record A$33.14 in Sydney as investors await its earnings release tomorrow. National Australia Bank Ltd. climbed 1.3 percent to A$36.55, a 5 1/2 year high.

Kingsgate sank 4.7 percent to A$1.35 after the company said output for the September quarter dropped 18 percent to 50,786 ounces.


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)